About
This is the HSM penny stocks blog where you can find stock picks and commentary on stocks being mentioned on the message boards.
About Penny Stocks
Penny stocks can be thought of as the race cars of the investment world, they are fast and exciting, and like race cars, some go from zero to 100 in two seconds, while others may end up in spectacular crashes!
Obviously nobody wants to be involved in a crash, as such there are things penny stock investors can do to reduce the risks of crashing. On the flip side, seeing 100%, 200% or even 1000% gains in a short period of time is common with penny stocks.
Penny Stock Investment
The first thing you as a new investor should be aware of, is the high risk involved with small cap investing. When you buy a company like IBM, DELL or GE, you are buying a quality company, backed by big names and run by hundreds of managers and consultants. Small cap companies are often run by only a handful of people. Often there is the CEO/founder/president, perhaps a COO and a few employees.
It is this small structure which results in the potential for huge gains. Often a small penny stock will see its stock soar after a big contract has been signed, or new partners announced. Any small shift in business can result in multiple increases in revenue for a small company, this is reflected in the stock price.
The opposite is also true, if a small penny stock company loses a deal, or is hit by a hard quarter, the damage to the balance sheet could send the stock dropping fast.
We have more on this topic in our Penny Stock Risks article.
Avoiding the risks
The best thing that a new investor in penny stocks must learn is to lock in your profits early, and limit your losses.
Drop by the Stock Market University section of this site and start reading up on the strategies involved on protecting yourself from the dangers and profiting from the big runs.
